ancestor-or-self::*/@*

selects all the attributes from here up, and

<xsl:copy-of

a) sorts them in to document order (this is important, as we'll see)
b) copies them all into the currently open element
c) always, if two attribute nodes of the same name are added, the second
   one replaces the first, so, because of (a) the innermost attribute
   will be added last and will end up in the result.